Sweet 16 Update - Feb 11

[dan_s]

On this weekend's Sweet 16 spreadsheet I show my 2017 operating cash flow per share forecast for each company. You can find it under tab 1 on the right side of the spread sheet.

As a group, the Sweet 16 is trading at 8.4 X 2017 CFPS, which is a rather low multiple for a group of companies with this much running room. All of the Sweet 16 will generate strong cash flow from operations in 2017 and they have double digit annual production growth locked in.

SM Energy (SM) is trading at the lowest multiple of operating CFPS (4.82X) and the highest are Parsley Energy (PE) at 14.36X and Pioneer Natural Resources (PXD) at 13.41X CFPS. SM is a company "in transition", so investors are waiting for things to settle down and clear direction to be established. IMO SM is not getting the credit it deserves for what they are building in the Permian Basin.

All of the Permian Basin companies are trading at high CFPS multiples because Wall Street is head-over-heals in love with the Permian Basin. They have good reason to be. The Permian has "Stack Pay Zones" and decades of low-risk development drilling locations.

All three "gassers" (AR, GPOR and RRC) are trading below the average.

The SCOOP / STACK companies look very attractive to me: CLR, DVN, NFX and XEC.

[wilmawatts]

DVN and NFX look really good to me also, STACKers

[dan_s]

All of the Sweet 16 look good to me, which is a bit of a problem. At least four of our Small-Cap Growth Portfolio companies deserve promotion to the Sweet 16, but I cannot decide who to drop. I may make a few changes just based on size.